Lionsgate Circling Relativity Library As Chapter 7 Filing Looms

EXCLUSIVE:Lionsgate is circling Relativity’s 40-plus title library — which includes films such as Limitless and Act of Valor — after it has become clear that CEO Ryan Kavanaugh’s company is backed into a financial corner with cash flow rapidly declining.

A Chapter 7 (liquidation) is on the horizon and could be filed before year’s end, sources tell Deadline, which if so would come only months after Relativity emerged from Chapter 11 restructuring in April. While multiple sources said Relativity is nearing its end, one source said they are desperately trying to refinance. In the meantime, the company made its payroll today.

Lionsgate is said to have a serious interest in the Relativity library. Lionsgate had no comment. A source told Deadline the library also carries with it some debt. Kavanaugh did not return inquiries for comment.

Sources said to expect a resolution for Relativity before year’s end, which could send a number of executives and projects back out into the marketplace. The company still has the Halle Berry-starring Kidnap on its slate to release December 2, while Mike Flanagan’s Before I Wake starring Kate Bosworth and Thomas Jane has been taken off the release schedule entirely.

Relativity and its lawyers told the U.S. Bankruptcy Court in New York early this year they were optimistic about the company and its financial prospects. The company’s now struggling to meet its debt obligations. The next hearing on the company in the court is October 20 for Relativity Holdings v. VII Peaks Capital.

Since re-emerging from Chapter 11, Relativity has opened two films — and both bombed. The Disappointments Room grossed only $1.4 million in its opening weekend on a $15M budget, and the ensemble comedy Masterminds has taken in a total of $14.2M to date after papers submitted to the bankruptcy court said that the studio was estimating $125.4M in lifetime revenues from the film against $78,346 in distribution costs.

“This could be the fastest out-of-bankruptcy-and-back-in-again in corporate history,” said one executive with knowledge of Relativity’s financials. For the sake of all the employees who would be facing layoffs, we hope not.